i'm jim cramer. and welcome to my world. you need to get in the game! >> firms are going to go out of business, and he's nuts! they're nuts! they know nothing! >> i always like to say there's a bull market somewhere. >> "mad money." you can't afford to miss it. hey, i'm cramer. welcome to "mad money." welcome to cramerica. other people want to make friends. i'm just trying to save you a little money. my job is not just to entertain, but i'm trying to coach and teach you. so call me at 1-800-743-cnbc. two stocks passing 700 in the night. one going up and one going down. i'm talking about the trajectory of google versus apple.
two stocks that define the stalled market. on a day where the dow finished 21 points lower, s&p sank 2.22%, and the nasdaq declined .60%. apple today failed to take out its all-time high, except this all-time high came three days ago. down $9.30. in stark contrast to the fresh high made by its plus-$700 neighbor google. fresh high, fresh high after multiple years. of course this $700 hook is just a device to capture your attention. as google is worth about 245 billion while apple at 691 is worth 648 billion. remember, the actual dollar price doesn't matter as much as the price to earnings multiple. the way to compare apples to apples so to speak when you're comparing apples to googles is to look at that p/e ratio on next year's numbers. what's the market paying for the future profit streams of the two companies? google selling at 15 times next year's earnings. apple selling at 13 times. when you stloe in the fact the
analysts believe google will grow revenue slightly faster than apple, i'm calling that a push. all that said, if you were to put a gun to my head and ask me which one i like more at these prices, i would say first, put the gun down. google versus apple puzzle ain't worth die for. but i've got to tell you, it's becoming a lot harder to own apple than it is to own google. you know what? i think that's the real issue when you compare them right now. the reason -- it's because the expectations for apple have gone completely and utterly insane. what people demand of apple at this point is quite frankly ludicrous. google no, one even seems to care that much about expectations. the run at apple is about as in your face as it gets. but google has been having a stealth rally noticed only by my colleague brian sullivan on "street signs" and yours truly. given that apple is up 71% this year while google is only about the same amount as the s&p 500,
you can feel more comfortable about owning google knowing you won't be giving up big 2012 gains if the market goes down because it doesn't have any big 2012 gains. when i say that people have gone bonkers over apple's expectations, you only need to look at the 1-2 punch of the sunday "new york times" bits article entitled "disruptions: will apple be the first to break 1 trillion?" and the & then the absurd pieces today about how apple missed expectations for sales of the new iphone by perhaps as many as 3 million since friday. i mean, yeah, missed it. we'll have more in a second. the setup is just too much for people, though. given the huge rally in the stock, it makes all the sense in the world for apple to go down. who can live up to either data point? it is nuts, people. you simply don't want to hear from a baseball announcer that a pitcher has a perfect game going into the middle of the sixth inning. oh, yeah, man, he got the perfect game going. well, that's an acknowledged jinx. we all know that. similarly, we don't want to see people projecting the inevitable inel uktable run for 645 billion
for apple to a trillion. that's a recipe for a jinx, too. as soon as i saw it, i said to myself, trillion. that sounds like a top if ever there was one. the bell went off on that thing. then even as we read a gazillion art uk lz this weekend about how so many stores on the got a handful of iphones had there was demand for ten times that many we have to read story after story today about disappointing sales. listen, i'm trying to get one. hey-i love -- if it's so disappointing i would get one. how the heck can sales be disappointing if every single one of these things is sold? how can sales be disappointing when the company has far more demand than the company can handle and the demand is inelastic? people say they don't have any? they're out of crest? give me some colgate. these people if line, they want an apple iphone. they're not going to be is bummed over the weekend they'll switch to an android or a xwoly gee, research in motion, give me a blackberry. nokia whatever? that's not what's at stake. but the simple fact that there could be so much disappointment and so many people selling on stories that he with all know really aren't true tells you there's something else at work here and that something else could be what my friend jonah
sarah said in the saturday edition of the "new york times," has app many peaked? this piece had a real thrust to it. it's that big undercurrent we're also worried about all the time, that apple isn't the steve jobs apple anymore, it's something else, something whose time has come and maybe gone, and this product like an x, marks the spot. which brings me to google. almost all the reviews of the faepz of the iphone 5 are positive, with one exception. which is the substitution of apple's maps product for google maps. as someone who swears by his apple 4s, in part because of my love for google maps, which has bailed me out all over the globe, i see no reason to get a new iphone 5. i like this one. i actually can afford to wait until apple gets its map business together because i like google maps too much. at the same time apropos of the "new york times" piece you never want apple to release something that isn't the best. and even though we know from walter isaacson's fabulous steve jobs biography that he hate
google he hated inferior products more than he hated google. this is like microsoft stifling other products that were better by sticking its own products into windows instead. that and some other concerns triggered antitrust action, led to a definitive and never to be challenged top. so maybe, just maybe it is happening again with apple this time. and i hope not. but it could be. google on the other hand has several things going for it that make it an easier buy than apple right now even up 15 bucks today. still apple still affiliated with the founder, who is no longer alive. therefore we know at a certain point the drawing board of a founder who isn't with us will end. has it already? we don't know. but google's different. google is a machine. it isn't a man. and it isn't beholden to any one person. when steve jobs was alive, you would rather own a piece of jobs. with jobs not with us, you would rather own a live symphony than a late virtuoso. second, google's pulling away from the internet competition while apple now just seems one step ahead of the sam sungs posse, a posse that's backed by google software, software that's universal liu praised. i was more worried about facebook cutting into google's
business a year ago. now i'm hearing that facebook might go in against google search someday. yahoo! may be getting its focus back, but i'll believe it when i see it. bing? bing. google is the once and future king of search. third, i was worried about the overpay for the motorola acquisition, but we just got a terrific piece of research this morning. i really urge you to get it from mark m hainy at citigroup. talking about how google's gotten its money's worth from that deal and more so. finally i've been hoping that apple would find a way to assert itself into social media the way it has come to dominate the other two tech, mobile and the cloud. maybe buy twitter to compete with facebook. that hasn't happened. meanwhile, google is doing terrific social work. oh, and of course it has google maps. the bottom line, look, i'm not backing away from apple as an investment. i told you not to trade an investment. too soon. my charitable trust actionalertsplus.com owns it. but if you wanted to buy something right now, i think google's a cheaper, better stock to own. shocking? no more shocking than apple screwing up its maps product. hmm. maybe that is shocking when you think about how few mistakes apple's made this millennium. let's go to buddy in texas, please. buddy? >> caller: jim, a big 3-0 number
one in the power rankings houston texans boo-yah to you. >> yeah. what do you got there? look, if you had said the cardinals 3-0, i got to tell you what i would say is i want to short your stock nine ways to sunday. but you were fine. i have no beef with the texans. >> caller: we take what we can get, brother man. >> exactly right. >> caller: you said the only way to play apple is apple. but i feel we have a really strong derivative play here. my question today is in regards to skyworks solutions, swks. reports have cited they've increased the footprint in the new iphone 5 although not as much as some had anticipated, which cause a pullback this past week. >> well, you know, look, i've got to tell you, i was back and forth with it. stephanie link, she was on "fast money" today with scott wapner. the show was red hot. i was saying listen the stock may be down enough to own it. my friend brian ashenberg on the street.com where i've on the board was saying this is way overreaction. swks up less than down. david aldridge is a good man.
wish he would come on the show and straighten this out. why don't we go to elliot in pennsylvania. elliot? >> caller: hey, jim. thanks for having me. my question is holtby over the last year has tripled. kb homes is up over 150% in the same period. while neither had earning. nvr is up 41% with earnings per share over $27. why do you think nvr's stock price is lagging others in the housing sector? >> people don't like an $800 stock. it's a very illiquid stock. a lot of people -- a lot of big institutions feel like it's a roach motel, they can get in but they can't get out. and they should have split the stock ten times. i know splits don't mean anything, but this stock's so illiquid i don't blame any institution foreign wanting to touch it even as you're right about the fundies. can i go to kevin in connecticut, please? kevin. >> caller: first time caller, long-time listener. big fan. >> terrific. >> caller: the insurance bureau retired last week what. effect will that have on the company in the new year?
>> nothing, but i think his company has been making a comeback. it's been fallow ever since spitzer really took it down. but my favorite in the insurance business and it's not necessarily a broker, but -- versus mmc. and they have a pretty good at mercer business i like is aig. i reiterate that aig anywhere between here and 40, my charitable trust owns it, is a buy, a buy, and a buy. two tech titans right now. google, not apple is the one to bet on. "mad money" will be right back. coming up -- >> snapping, crackle, pop. >> cramer's always on the lookout for bull markets, and he may have found the next big buying opportunity in the unlikeliest of places. the cereal aisle. is it time to fill up your bowl? stick around to find out. and later, new neighborhood? housing stocks have been building momentum lately. but could the trend be moving from the dotted line to dotcom? tonight, cramer knocks on the door of internet real estate
marketplace zillow to find out if it's time to move in. plus, decked out? retail has been all the rage in wall street's runway lately. but can value plays like dress barn continue to stay in style? cramer's sitting down with the ceo of acena retail to see if it's time to dress up your portfolio. all coming up on "mad money." don't miss a second of "mad money." follow @jimcramer on twitter. have a question? tweet cramer. #madtweets. send jim an e-mail to email@example.com. or give us a call at 1-800-743-cnbc. miss something? head to madmoney.cnbc.com. this country was built by working people.
the economy needs manufacturing. machines, tools, people making stuff. companies have to invest in making things. infrastructure, construction, production. we need it now more than ever. chevron's putting more than $8 billion dollars back in the u.s. economy this year. in pipes, cement, steel, jobs, energy. we need to get the wheels turning. i'm proud of that. making real things... for real. ...that make a real difference. ♪ ♪ [ male announcer ] introducing a stunning work of technology. introducing the entirely new lexus es. and the first-ever es hybrid. this is the pursuit of perfection. but [ duck yelling ]
then once we have the facts, we can use a little deductive reasoning to figure out who the next big winner could be. so consider what i'm calling general mills and the curious case of the missing market share. last week, we were up from two very important food companies. general mills on wednesday and con agra on thursday. in an environment when many people were frightened that the food business would take a big hit courtesy of that horrendous drought, both of these companies reported nothing short of phenomenal quarters. both stocks are trading at or near their 52-week highs, but if you want to put a resurgence of the packaged food group, i now think you've got to look elsewhere. you want a stock that hasn't run. even as it's benefiting from the exact same trends as conagra and general mills. why were their quarters so good? what pieces of evidence can we
glean from their earnings reports? this is fun for me. it should be fun for you. i want to put fun into this, for heaven's sake. that's how you make more money. first, both general mills and con agra indicated the commodity costs can be moderating. now they've got two major food companies saying it's not as bad as you think. conagra is probably more sensitive to raw costs and they slashed their cost inflation guidance down to 3% and the ceo there had been the most honest about how bad inflation has been for his company. second, a little cue from general mills. if general mills is losing share, somebody else is taking it. so now we put it all together. if commodity costs are going to be less of a problem for food companies going forward and somebody is taking share from general mills and the cereal business, what i deduced s that you have to buy kellogg.
company buy all sorts of sugary cereals, not to mention tons of snacks, including pringles thanks to a recent acquisition. why kellogg? well, obviously, if someone is stealing market share from general mills in the cereal aisle, kellogg is the most likely culprit. it's other major cereal maker. the insinuation that kellogg might be taking share, i'm calling that icing on the cake. the more important reason has to do with the fact that kellogg has indeed been a laggard. these stocks playing catch-up with each other. its stock is up only 2% to date. general mills four points off the high. those guys are at the high. kellogg is cheap enough to be bought right here. it has the catch-up potential. that's what we just heard from general mills and conagra. i'm confident kellogg will be catching up real soon. the last time we heard from kellogg, they were bearish about
commodity inflation. can you imagine? maybe that number is too high. that will really be good in the conference call. we've got all the ingredients necessary for an upside surprise in early november. kellogg is a turnaround story. at the end of 2010, the company brought in new ceo john bryant, who's been trying to get the business on the right track by getting the pricing right and introducing new products. i was very critical of them. they weren't making it. but i think they're turning it now. they've got cereals like crave, different varieties of kashi. at this point this stuff seems to be working. kellogg's last quarter, it was pretty good. the company's u.s. business was in excellent shape. they did say that european business was having trouble. europe is not as big a piece of the pie for kellogg that we should totally fret about it. we know from conagra and general mills that they are doing better.
more proof, how about the mystery of the missing cereal market share. we know kellogg's share is up by roughly 20 basis points, but general mills also sharing in europe. in europe, kellogg has been working its butt off. got a new management team in place over there. and basically the circumstantial evidence from general mills. it seems like these guys do know what they're doing. the general's pain could be kellogg's gain. what else? last year, just about every packaged food company including kellogg had to raise prices in a big way to pass on higher costs. when you raise prices, that usually puts downward pressure on volumes. the price goes higher, people buy less of your stuff than they would otherwise. you probably wouldn't buy as much either. now as customers get used to higher prices, volumes are starting to rise again. i think we'll see the same thing at kellogg. beyond what we heard last week from general mills and conagra, kellogg recently bought pringles. this was an undermanaged brand.
so far that acquisition seems to be going much better than expected. procter is not a food company. kellogg knows exactly what to do with snacks, okay? sales are already up about 9%. management is taking out costs left and right. i don't think they have that anymore at kellogg. plus, kellogg pays you a juicy 3.4% yield. that's nothing to sneeze at. i'd say they're paying you to wait. but you only have to wait until november 1st because that's when kellogg reports. i bet you they fill out a terrific story. the bottom line, sometimes all it takes to find terrific stocks is a little deductive reasoning by listening to other companies in the same industry. conagra tells us food inflation not nearly as bad as we thought. general mills hints that somebody is taking market share away from them on the cereal aisle. from there it's easy to deduce that the time to buy kellogg has arrived. let's go to barbara in new york, please. barbara. >> caller: hi, cramer, how are you? >> real good, barbara. how are you? >> caller: i'm doing good. what do you think of this secret
company that's been around for 116 years? started in 1896. tootsie roll! >> i think it's a great company. i've liked it. when i was at goldman sachs, i stumbled on these guys. i said listen, these guys are mccormick spice. i said listen, buy them. put them away. business is good. we'll constantly check them up. obviously you can't just buy and hold. but i think you're in a winner. unfortunately, a lot of other people know it now. it was unknown when i was recommending it back in the '80s. let's go to marla in mississippi. >> caller: boo-yah, mr. cramer, from sunny mississippi. >> nice. >> caller: my son and i love your program. he's 14. >> great. >> caller: and he watches it every day. >> yes! >> caller: he has a question for you. and it is as an investor interested in the food sector, do you think flower foods or b&g foods has more upside? >> that's a great question. he's got horse sense, your boy.
b&g has moved up tremendously, but it's run by mr. wenner and he has done a remarkable job. here's the problem with flowers. maybe i'm biased. when i was a young reporter covering florida state football, flowers opened a plant near me. they've had to reorganize. i think that bakery business is way too hard. but i think the pickle business and the regina balsamic is good. i want b&g in my portfolio. the time to buy kellogg is here. stay with cramer. coming up, new neighborhood? housing stocks have been building momentum lately. but could the trend be moving from the dotted line to dot-com? tonight, cramer knocks on the door of internet real estate
marketplace zillow to find out if it's time to move in. and later, decked out? retail has been all the rage in wall street's runway lately. can value plays like dress barn continue to stay in style? cramer is sitting down with the ceo of ascena retail to see if it's time to dress up your portfolio. all coming up on "mad money."
tonight we're taking a closer look at zillow, letter z. the website where home buyers and renters go for all things related to real estate. a living database with information on more than 110 million homes. zillow is the leading player and its stock has been on a tear, up 98% for the year, thanks in part to the resurgence of the domestic housing market. last week a main competitor, trulia came public. now that the market has become more crowded with these online real estate plays, is zillow too hot to handle? i have little doubt that zillow will wipe the floor with the competition. that's my take. these online business are all about mind share. zillow is the mind share leader. the company has a smart mobile strategy, including a smart app that's designed for renters. the stock is expensive. zillow sells for 64 times next year's earnings. that seems less daunting when you consider the company has a 40% long-term growth rate. zillow just did a four million
share secondary at $43 a share. it's now more than a dollar above that level so you made money if you got in the deal is. this the ideal to play the housing rebound, or is it a red hot stock? let's talk to the ceo of zillow, find out more about his company and where it is headed. welcome to "mad money." thank you for coming on the show. >> thanks for having me. >> we've had a lot of people chattering. lennar had a great number. kb homes, a terrible home builder, had a good number on friday. you have the pulse of all this. are we finally at a point where it's safe to say that it is smart to buy a home, the regions you cover all show bottoms. >> home values have bottomed. we are at the bottom. that's the good news. we're basically at a saw tooth bottom. so some parts of the country, like chicago, for example, are still declining. other parts of the country like miami or phoenix, are actually going way up. so it depends on where you're looking at buying a home. mortgage rates are at an all-time low, though, so if you're a home buyer that's been
waiting and waiting and waiting, this is definitely a good time to jump in. >> you have this good business, this mortgage business. i think you have a pulse on whether people can get mortgages. you hear over and over again rates are low, but nobody can get a mortgage. >> it all depends on your frame of reference. it's harder to get a mortgage than it was three or four years ago, but on a historical basis it's basically as hard or not hard to get a mortgage as it was back before the giant run-up. so yeah, you have to document your income. yeah, you have to get an appraisal. but these are things that you used to have to do. and it's reasonable for a lender to ask you to document your income or document the value of your home before lending against it. so it's a return to normal. >> people like the rental site? >> rentals has been great for us. we have a leading rental app across other mobile platforms. renting on zillow.com, on the desk top is growing like gang busters. six million people use us every month to shop for rentals. >> we had trulia on last week. they didn't want to talk about it. but you recently sued them on what seems to be your key algorithm.
where is that? because they didn't think it was of significance, the lawsuit. >> well, look, we have a patent on the zestimate and a homeowner being able to change information about their home. 35 million homes have been changed on zillow and had their home value impacted. when someone steals that intellectual property, we take it seriously and yes, we sued them. >> you have on your conference call one third of your reports are edited by homeowners and representatives. does that mean there's a lot of them that you're worried about may not be accurate? >> there's not much incentive to game the system. it does impact the zestimate. there's really no reason to lie. that will come home to roost when you sell your home. we haven't had issues with owner fraud. >> there are a lot of people in and out. one of them says to me, listen, jim, you were so high on that yahoo! tie-in, but it really doesn't bring a lot of revenue. to me, as someone who started a website, i know that yahoo! is
still the be all and end all. can you quantify how important yahoo! is for you? >> it's pretty important. when we say hey, would you like to advertise with zillow, they become a premier agent on zillow.com, on mobile, across all the apps that we have, and on yahoo! real estate. that's quite powerful to an agent. yahoo! real estate is the real deal. it is a very highly trafficked property. >> you say when you call someone, people are saying listen, that telesales business is very expensive. find out whether telesales is going to eat into your profits eventually. >> about half of our bookings are upsells where an existing premier agent calls us and that's more inventory because it's working well for them. the big move that we've made is into software tools so now we're providing not just lead generation, not just a place to advertise, but also software, a customer relationship management tool and a website which helped them manage their business. providing those tools helps improve their advertising spent with us. >> are there certain areas of the country that your business is better than? i am a reader.
i read "the new york times" real estate section and it's really excellent. i imagine that not every city has something as competitive as "the new york times." are there cities where people are just saying listen, zillow is the only game in town? >> in 19 out of the top 20 cities, we're either the largest or second largest real estate website. we're very popular nationwide. we have 35 million monthly people that use us on the web and mobile. if you include yahoo! real estate, the numbers get off the charts in terms of our category leadership. >> now, you did the secondary. your stock does trade. i mentioned the multiple is very high. that's unusual given the amount of competition to be able to have a 63 times mobile. but your growth is such that do you think you can maintain that longer term growth rate that would make it so the multiple is not outrageous? >> we grew revenue 75%. what investors see in zillow is the size of the market. real estate agents collect about $60 billion in commissions and
turn around and spend 6 to 10 billion a year in advertising. we still have less than 1% of what real estate agents spend on advertising. we've seen in every category, ad budgets catch up to eyeballs. more and more of those ad budgets will move over to zillow. >> you do have the best story in the group. ceo of zillow incorporated, letter z. go and listen to the conference call because you have to understand the ways to make money. i don't want you to say jim, why didn't you tell me this or that? it's all there. it's a totally transparent company. stay with cramer. coming up, decked out? retail has been all the rage in wall street's runway lately. but can value plays like dress barn continue to stay in style? cramer is sitting down with the ceo of ascena retail to see if it's time to dress up your portfolio. it is time! it's time for the "lightning now, that's what i call a test drive.
silverado! the most dependable, longest lasting, full-size pickups on the road. so, what do you think? [ engine revs ] i'll take it. [ male announcer ] it's chevy truck month. now during chevy truck month, get 0% apr financing for 60 months or trade up to get the 2012 chevy silverado all-star edition with a total value of $8,000. hurry in before they're all gone!
start the lightning round. going to start with cory in arkansas. cory? >> caller: hey, orange county, but close enough. longtime listener, first time caller. >> okay. >> caller: i'm interested in taking a long position in tsla. >> too dicey. too dicey. no, no, no. this is just a very overvalued stock. i'm not going to recommend it. let's go to bob in florida. bob? >> caller: jim, i'm honored. west palm boo-yah means win, so just boo-yah, baby. my question to you is i have a lot of contracts in bank of america that go to january 2014. am i going to just boo-yah baby, or am i going to take the leap? >> i think you're fine. i've been looking at this stock and saying when do you really just say listen, it's time to really back up the truck, and the answer is you can't because the company's record is so spotty. but at $9 -- actually, $8.80 on the chart, it's worth it. it's a buy. let's go to rich in new jersey.
>> caller: i bought lorillard. the symbol lo. it is about $120. do you think it's a big deal? >> i do prefer pm in that group because it got hit in the earnings and yet it's really a value. let's go to jerry in california. jerry? >> caller: boo-yah, jim. do i double down on westport innovations? >> it's a speculative stock. they haven't had a news announcement in a while, so it goes down. i no longer believe that that's going to happen because neither presidential candidate favors it in a way that will make it worthwhile to own. let's go to josh in wisconsin, please. josh. >> caller: hey, jim. mcdonald's. last week i was in there and i was going to order and i looked up and saw the calorie counts and it took me like five minutes to figure out what i wanted, i almost didn't order. >> i don't know, i was surprised
that the egg mcmuffin came in so low. i thought it would be like when i make my tailor egg and ham and cheese. it came in below that. mcdonald's is fine. we've been trimming it. i think you can still go higher. sally in florida, please. sally. >> caller: hi, jim. this is sally from florida. >> hey, sunshine. >> caller: thank you for taking my call. i'd like to have your opinion on petroquest energy. >> this is a very speculative energy company. if you think oil is going to go up 20%, 30%, you buy it. if you don't think it is, you sell it. that's the way it works. shelby in arkansas, please. shelby. >> caller: yes. >> shelby. >> caller: an arkansas boo-yah
and we're going to elect jim cramer for president if he'd ever run for president. but my question would be hek. >> i think heckmann is turning into a world class amelioration of pollution company for fracking and for drilling. the stock had a monster move from three to almost five, and i think at this point, you've got to let it cool off. it remains a speculative stock that i like and want to buy. let's go to steve in new york. steve? >> caller: hey, jim. thanks for taking my call. hcn. >> i was telling people that that secondary is going to be good because they're buying sunrise senior living. i think hcn is still a good buy. matt in michigan. >> caller: yes. simon property.
>> another one did a deal and i think that's expanding. hgn, those are for me. and that, ladies and gentlemen is the conclusion of the "lightning round"! [ male announcer ] if you believe the mayan calendar, on december 21st polar shifts will reverse the earth's gravitational pull and hurtle us all into space. which would render retirement planning unnecessary. but say the sun rises on december 22nd, and you still need to retire. td ameritrade's investment consultants can help you build a plan that fits your life.
you know that retail's been on fire lately. the good ones, i don't think they're finished. some of them could have a lot more room to run. that's why tonight i want to talk to you about one of my favorites, it's dress barn. i like ascena because this company has made smart acquisitions over the years.
about eight weeks ago, they brought a midwestern retailer focused on twentysomething women. then they bought a tween oriented concept. then to top it off this may, ascena told us it would buy charming shops, the parent of three plus-sized brands. at the time i told you i thought this was a huge deal. especially since we know ascena's got tremendous experience in integrating big acquisitions. while the company handily beat the earnings and revenue estimates, many people considered the company's guidance to be disappointing. initially the stock got banged down 5%, but by the end of the day, it was almost back to where it started as investors i think realized that the forecast was more bullish than they first looked. however, there's confusion here. some accounting changes. i think ascena's going to clear up everything on october 18th but i don't want you to have to wait that long to understand the story, especially given that
this stock has already given us a fabulous 59% gain since the last time we spoke to ascena's ceo about a year ago. let's check in with david jaffe to get a better sense of what the future looks like. mr. jaffe, welcome back. you guys have a portfolio now more than when i saw you last of diversified retailers. why is that good? why is that the way to go? >> well, jim, what we've done is buy five brands that are really focused on their niche customer. so while no niche is completely offensable, we think each one has a lot of barriers to entry from significant competition, so we set each one up for success and what we've done is allowed those brands to focus on their target customer and then we're supporting the brands on the back end through our shared service group, so they are able to leverage costs, do things
more efficiently, by doing it for five brands rather than just one. >> so taking advantage of all the low price of cotton, sourcing all over for all five stores. you don't have to have five separate buyers. >> those are some examples. a better example might be dc. why have five dcs, five trucks showing up at five different stores instead of having just one dc and one truck going out to the five stores. >> okay, now. you were on the conference call. i think some people were concerned because you said that the results had been choppy, and i'm not exactly sure why. is it less choppy, are the headlines bad? you mentioned the election. are these things i should be concerned about? >> i didn't mean it about the business. i meant the consumer. the cosumer feels less ebullient than maybe she's been in the past. we've had strong weeks as an industry and some other weeks that we scratch our head, whether it's the election, the primaries, the olympics. everybody's got their excuse. i think until we see some of these issues get resolved, maybe a little more consumer
confidence, i'm not sure we're going to see that strength, that continued strength on the consumer. >> some people felt that your decision to not use your cash flow to buy more shares, but instead to pay down debt and to spend money, capital expenditures on the stores, is a change of pace for you because you've been so good at returning money to shareholders. is this a new style for you guys? >> with this acquisition of charming, we have $300 million of debt. we want to pay that down. and at the same time, we want to support our brands as they open up stores, make investments in new stores, ecommerce, what have you. as we see projects that we can do for shared services like the distribution center i mentioned earlier, that's big bucks. we think it's got tremendous return on invested capital, so we think it's the right use of capital. so we're going to do all three over the next couple of years. >> when charming shops -- i'm from philadelphia.
when you bought that, you closed fashion bug. i think that fashion bug, i always thought in the right hands, someone could turn that thing around. not true? >> well, perhaps. before we got involved with charming shops, it was for sale. and they really couldn't find any takers that were willing to pay anything for it. so when we looked at it, we played the two scenarios, try and run it, and we didn't think we had any magic bullet that the existing management didn't have. or if we wound it down and developed programs to transfer those sales to our other brands, we think we'd be much better off. rather than sell it and give those sales to someone else, we're going to use different programs to try and bring those sales to our other four brands as well. >> speaking of giving sales to someone else, a lot of people have told us over and over again that jcpenney is just bleeding. are you in some of their places? i don't see you in where they are. >> sure. depending on the brand. a lot of the brands are in
either the same center or in adjacent centers to jcpenney. i think jcpenney has a very bold strategy. we'll see where that comes out. in the meantime, they have had a tough run and we're out there trying to attract some of those customers into our different brands. >> limited has been a great stock that i've been behind ever since mr. wexler started it. they are the only other one i know that has this kind of portfolio. is that a good role model for you or do you think this is your own -- that's been a winner. is that what you see happening with ascena over time? >> it's slightly different. in most cases, he's built those brands from within. >> right. >> so we said let's go out and identify the best brands, buy them and leave them in place. so maurice's is still in duluth. justice is still in columbus. and we keep the existing management teams in place and we let them continue to focus on their customer. they have their own culture. and we support them on the back end. >> it sure worked. i think the october analyst
sleep train's inventory clearance sale is ending soon. save 10%, 20%, even 35% on a huge selection of simmons and sealy clearance mattresses. get 2 years interest-free financing on tempur-pedic. even get free delivery! sleep train stacks the savings high to keep the prices low. but hurry, the inventory clearance sale is ending soon. superior service, best selection, lowest price, guaranteed. ♪ sleep train ♪ your ticket to a better night's sleep ♪
why is no one worried about the transports? here's a question i was asked three times on friday. three times this weekend online. until the rebound today, this group has been horrendously weak. lots of people actually really are worried about the transports or they wouldn't be asking about them. second, it doesn't seem to matter that lots of people are worried about the transports, even if it says you can't sustain a broader rally if the transports aren't onboard confirming the big advance. i've learned never to look through this index. whenever the transports do not confirm a dow jones industrial rally, that's still one more form of code. when you justify your bullish actions by saying this time it's different, well, let's just say
you tend to get your head in it. but there are some signs that transports have had a decline. that's why it's good to think the importance of the transports might be overblown in a newfound way. that reason is coal. you can't transport the stuff by truck. you cut coal shipments, you cut into the core of rails' earnings. that's undercut coal's competitiveness. i think it's going to last for years and years. shipments to steel companies, they haven't been able to make up for the short fall. infrastructure and construction have been in decline for years in this country. of course, coal's weakness has been masked by the strength of other key cargoes, namely ag, auto. but the ag business took a hit from the drought. out of all the major rail cargoes, only auto's buildup boom time figure has remained strong. ag can come back with next year's harvest, but coal, no, lost a competitive edge where
utilities have to fix it with expensive retro fitting. it's simply cheaper to switch. they can't make up for the lack of demand because of a shortage of ports, particularly out west, which limits the amount of coal that the railroads can ship. what worries me, if i look past the rails, i do see weakness in trucking and airlines. only truck rentals like rider seemed stronger than expected. the woes of fedex and ups are representative of the trucking weakness. the airlines can't offset and are going to go away. anyway, because they aren't all that profitable and oil has to come down substantially to make a difference. put them all together and you're right to worry about the transports. what's the saving grace? this rally has not been built on industrial stocks that should be giving up the ghost as the transports. it's been built on consumer packaged goods.
health care. recently financials. telcos. and the internet and apple. the weakness in the transports, while important, simply isn't that representative of what's going up. so my take, other than the apple iphone, worry, sell industrials, because of the transports, but alas, they have nothing to do with the strength in eli lily, verizon, or google. they play a role in the rally, but not the role. you're only worried about a subset, not the whole market. let's not forget, this could be day one of the transport rally, arriving just when we have all given up on the group. stick with cramer.